Will Union Budget 2016 bring cheer for Indian IT

It is that time of the year when once again anticipation grows and expectations fly high, with the Union budget being just around the corner. As the countdown to Union Budget 2016-2017 begins, the IT industry is upbeat and full of hopes that this time the Budget will bring some much-awaited reforms for Indian IT  and bolster growth in the sector.

We look at some key issues/points that if addressed in the upcoming Union budget by the Narendra Modi government, will bring cheer for the IT industry.

Indian IT has been facing various challenges over the last few years, especially with lack of clarity on transfer pricing norms. Industry veterans share a combined view that it is high time that the issue is addressed in the budget. M.N Vidyashankar, President, IESA, stressed that transfer pricing arbitrariness by assessing officers is something that needs attention. “Many battles have been fought and court and tribunal orders have gone in favor of the enterprises but the assessing officer’s whims and fancies continue.” He added that the industry needs to give a clear message to the government on this front.

Robust Digital Infrastructure

Industry experts are confident that the government’s promising initiatives like Start Up India and Digital India have raised hopes of unleashing fresh opportunities within the IT industry. But to turn it into a reality, there is urgent need for reforms that could foster healthy business environment and ease of doing business for companies in the sector.

Pointing towards the need for IT reforms, K. Balakrishnan, MD & CEO, Servion Global Solutions, said, “The IT and Electronics industry can play a key role in the success of these initiatives and the government should continue to focus on them by providing the necessary incentives, legal/tax framework and infrastructure support. This can provide a boost to the investment towards innovations, thereby creating a vibrant start-up community and new manufacturing investments.”

Voicing his opinions on the increasing need for digital infrastructure, Vamsi Krishna, CEO and Co-founder, Vedantu Innovations, said, “In the upcoming budget a significant allocation for develop a robust digital infrastructure across the country would be essential to translate the Digital India vision into reality.”

Increased technology adoption and improved IT infrastructure are prerequisites to the success of digital initiatives in the country. Anurag Jain, Chairman of AccessHealthcare shared his views. “We hope that the Government will come up with some positive announcements and tax sops to cut through the growth barriers. Any thrust on growth, infrastructure, job creation and skill development is likely to have a positive impact for the IT / BPO sector,” he said.

Sudhindra Holla, Country Manager, Axis Communication, also highlighted the importance of right infrastructure in line with government's Smart City initiatives. "With the enhanced focus on smart cities, this year we expect the Government to continue with the momentum on infrastructure and manufacturing, as we firmly believe that good infrastructure is incomplete without surveillance cameras and solutions. Also with government mandating CCTV cameras and solutions in verticals like transportation and retail, the budget should set aside substantial investment, for video surveillance solutions and quality cameras to make India a safer and smarter country.

Push for R&D Investments

Jain also emphasized on the need for better R&D investments in the country. “We also look forward to the Finance Minister announcing some monetary encouragement for companies to focus more on research & development in order to develop products and services that are at par with international standards,” he said.

One of India’s major drawbacks has been poor research and development (R&D) base and it is not too late for the government to help create the base and also to assist companies investing in R&D by way of fiscal and financial incentives,” said, Samir Dhir, Executive Vice President, Chief Delivery Officer & Head - India operations, Virtusa.  R&D, he said, made substantial difference in the IT sector.

Fostering a Start up Friendly Culture

Apparently, Nasscom Chairman, BVR Mohan Reddy, has also emphasized that the need of the hour is to offer the right business environment for start ups. On these lines, he pointed towards exemption on direct and indirect taxes that put a strain on their cash flows. While, stating a list of expectations from the Union Budget 2016, Ramesha Poojary, VP – Business Finance, Ness Software Engineering Services (SES) also stressed on the need for start up friendly schemes.  “Multiple startup-friendly schemes should be introduced to encourage entrepreneurs, including tax incentives and a quick resolution mechanism for startups.“

Industry experts hope that the plethora of digital and start up friendly incentives that have been proposed as part of the Digital India and Start Up India initiatives, get a solid push with the announcement of Budget 2016.